§ 6.53 p.m.
§ LORD WOOLTON rose to ask His Majesty's Government what steps they propose to take to recover debts owed to British subjects by countries with which we have recently been at war. The noble Lord said: My Lords, I put this question on the Paper because I want to 82 draw the attention of the Government to the position of people who own sterling bonds issued or guaranteed by foreign Governments or States. I do not propose to deal at all with the ordinary commercial debts that may have been incurred between British nationals and people trading in ex-enemy countries. The size of the issue which is involved is one that I am told by the Society of Foreign Bond Holders, who have the information, amounts to the sum of no less than £750,000,000 worth of capital. I would occupy your Lordships' time just for a moment by drawing your attention to the way in which these loans came about. They were loans to foreign Powers, but to foreign Powers with whom we had, at the time at which the loan was made, alliances or, at any rate, with whom we were obviously on terms of friendly relations. There was no question here of speculative gambling. Often the loans received the encouragement of high authorities. Some of them you remember were encouraged by the League of Nations, and several of these loans were in fact made at the time when the Labour Government was in office. These loans gave great encouragement to international trade; they were of great value to us as a nation—they were issued here because London was the financial centre of the world—and they brought, of course, credit and profit to us. I hope that the Government, who are hearing much, I believe, of this story, will not think that this is just another instance of big business coming along and asking what the Government is going to do to protect it. I know the Government is most anxious to protect big business.
§ I am not going to try and make your Lordships' hearts bleed at five minutes to seven at night, but these loans are for the most part held in very small denominations, the average holding being only £500. So we are dealing with the population of the country quite widely and not with any particular class, although I must admit this, that the insurance companies have quite large holdings in these bonds. The reason for that is that they are now an essential part of their trade, because it has become quite common in recent years for foreign Governments to say to British insurance companies who are proposing to develop in foreign countries: "If you do that, then you must have a deposit in this country of our bonds," and 83 that is the reason why the insurance companies are quite considerable holders of these loans.
§ I have not raised this question in the interests of the insurance companies, but because so many of the quite ordinary people of the country hold these bonds and they are wondering what is going to happen to them. They entered into these obligations with these foreign Governments and friendly Powers in all good faith that their interest would be paid, their good bond would be met, and in the long run their capital would be returned to them. I think it is not unusual that we should expect the Government to take every step which it is within their power to take to protect the rights of these citizens. Precisely what they can do I am not in a position to say, but I hope perhaps the noble Lord will be able to tell us.
§ There is one thing I am quite clear about and that is that this issue should be raised in the Peace Treaties that are subsequently to be negotiated. I will not detain your Lordships longer, but I think this is a matter of justice, and I think it is also very considerably a matter of expediency. We are a trading nation. International trade is of the greatest importance to us. Loans to foreign Powers from this country have been a great source of trade and wealth to us in the past, and they will be again in the future when once again we have restored our holdings and are in a position to export capital. Of course, every time you have default you reduce the tendency of people in this country, the willingness of people in this country, to invest their money abroad, and that in the end may prove to be of some detriment to our trade. I should be glad if the Government could give us some assurance that they are taking this matter seriously, and that they will take such steps as lie within their power to protect the people of this country from loss and to see that obligations by foreign Powers to British citizens are honoured.
§ 6.59 p.m.
My Lords, I am grateful to the noble Lord for giving me an opportunity of making a fairly full statement on this matter, which is undoubtedly one of considerable public interest. The noble Lord will forgive me 84 if I confine myself in my reply to debts owed to British subjects by countries with whom we have recently been at war, because that is the only really proper issue dealt with in his speech to which his question actually refers. He has talked in a most interesting way about the £750,000,000 which is owed us by various countries, but it is reckoned that much smaller sums are due from the ex-enemy countries, some £90,000,000 owing from Germany, at a rough computation, and perhaps £14,000,000 from Egypt.
There were, of course, considerable claims by persons in the United Kingdom and in other United Nations against the enemy countries in respect of contractual obligations entered into before the war. They may be described broadly as contract debts (including trade debts), bank balances, dividends and interest, business profits, payments out of trusts and settlements, patents and copyright royalties, rents, and also the capital of securities, loans and mortgages which had matured before the war. The policy of His Majesty's Government will be to secure a settlement of these pre-war claims on such terms as circumstances permit; that is, with proper regard to other competing claims such as restitution, reparations, costs of occupation and relief; but there is little reason to hope that (except in the case of Finland and in the case of Siam) the foreign exchange earnings of the countries available for the purpose will be sufficient to warrant a belief that a settlement will be effected easily and rapidly. The deterioration in the economies of the enemy countries, let alone their past history, makes it obvious that few if any of the countries concerned will be in a position for some years to effect substantial transfers in satisfaction of United Nations pre-war claims.
After the last war the recovery of debts owing to British subjects or residents in the United Kingdom by ex-enemy countries was dealt with in the various Peace Treaties. Under the arrangements made in these Treaties, enemy property in the United Kingdom was liquidated and the proceeds of liquidation provided the principal means by which pre-war debts were recovered. The situation at present is different from what it was after the last war, since, in most cases, the enemy property under our control will amount to a great deal less than the debts due to us. 85 There is the further complication that there is not any early prospects of a Treaty with Germany or with Japan. Treaties with Italy, Hungary, Bulgaria and Rumania are being discussed at the present time by the Deputy Foreign Ministers, with a view to a Peace Conference in Paris in May. The discussions have not, however, yet reached the stage at which it is possible to forecast what provision (if any) will be made in regard to recovery of pre-war debts.
In the case of Germany a Reparations Agreement was signed at Paris on December 21 last by the eighteen countries entitled to reparation from the Western Zones of Germany under the Potsdam Agreement. Article 6A of this Repara-Agreement provides that each Signatory Government shall liquidate German assets within its control and shall charge such assets against its reparation share. It remains, however, to be decided how the question of recovery of pre-war debts owed by Germany is to be dealt with. The Government have received representations from representatives of the bondholders on the question of ex-enemy bonds, and the Chancellor of the Exchequer stated, as your Lordships will recall, on March 6 that he intended to meet representatives of the interested parties shortly. The Govern also, of course, have fully in mind the question of pre-war trade debts from enemy countries. But at the present stage, for the reasons explained in the case of Germany and Japan, Italy, Rumania, Hungary and Bulgaria, it is not at present possible to say more than that this important question is under consideration.
Steps have been taken in two cases, namely, that of Finland and that of Siam, with which I will conclude by troubling your Lordships. Finland is in a special position among the countries with which we are still at war, by reason of her ability and willingness to enter into contracts to supply us with large quantities of timber and other valuable materials. A Memorandum of Agreement was entered into between the United Kingdom and Finland on August 2, 1945, providing for a resumption of trade and financial transactions and the liquidation of indebtedness between the two countries. Under this Agreement Finland agreed among other things that 12½ per cent. 86 of all moneys due from United Kingdom Government Departments in respect of purchases made in Finland (together with certain moneys collected by the Custodians of Enemy Property in the United Kingdom as being due to persons in Finland) should be paid into a special account at the Bank of England. This special account will exist for the purpose of meeting sums, due and payable (at the date of the coming into force of the Memorandum of Agreement) from the Government of Finland or persons in Finland to the Government of the United Kingdom, or to persons resident or carrying on business in the United Kingdom or in any of the British Colonial Dependencies. That arrangement, therefore, has been made. These sums include interest accrued and bonds due for redemption of certain Finnish loans and other agreed claims.
With regard to Siam, Article 5 of the Agreement of January r, 1946, terminating the state of war between the United Kingdom and Siam, provides:The Siamese Government agree to accept liability, with the addition of interest, at an appropriate percentage, in respect of payments in arrears, for the service of loans and for payment of pensions in full since the date when regular payment ceased.The method of settlement of other claims against Siam is under consideration. I hope that this recital will convince the noble Lord that we are certainly taking the matter seriously.